What services should I offer as I evolve my offerings?
We have our baseline rate, but now we need to define the services we’re charging for and their typical durations. This is where packaging comes in. By consulting with our agency ecosystem, we gained insights into common packages and their associated timeframes. From this, we identified key patterns:
That’s where the pricing and packaging model comes in
The Pricing and Packaging Workbook is a popular resource designed to help you package and price your services effectively to boost your agency’s profits. This guide offers recommendations but should be tailored to your agency’s unique needs. Here’s a quick walkthrough of the workbook.
What are the different pricing models?
Here is a quick walkthrough defining each of the pricing models. Identifying a pricing model is the key first step to creating a pricing strategy.
Hourly Rates
Hourly rate, or time and materials pricing, means charging clients based on the hours worked and materials used. Clients agree to pay a set amount for a specified number of hours.
Downside: While this is the simplest pricing model, relying on it long-term can limit your revenue potential. As you become more efficient with Klaviyo best practices, you'll complete tasks faster, resulting in less income. Essentially, the better you get at your job, the less you'll earn!
Hourly rates work well for smaller projects, but to scale your business, you'll need to transition to a different pricing structure.
Project-Based Rates
Project-based rates charge a flat fee for one-time projects, estimated by multiplying hours by your hourly rate. These rates work well for services like account setup and audits, helping convert leads into paying customers.
Pro Tip: Focus on deliverables and business impact when pitching. For example, if you charge $150/hour and a project takes 12 hours, the client pays $1,800 for setting up basic email flows.
Downside: Misestimating the time required can lead to undercharging and reduced profitability, or overcharging and client dissatisfaction.
Retainer Pricing
A retainer model charges clients a set, monthly fee to manage their Klaviyo accounts. Services include setup, ongoing management, and optimization. Retainers boost monthly recurring revenue (MRR) and client lifetime value (LTV) while fostering long-term partnerships.
Clients will stick with you if they see results. They'll feel confident they're getting the best ROI by working with Klaviyo experts who optimize platform use.
Retainers often have tiered pricing, offering more services at higher price points. This appeals to various budgets and gives clients a choice, making them feel more in control.
Downside: If the perceived value decreases or results are not immediately visible, clients may hesitate to commit to long-term contracts.
Value-Based Pricing
Value-based pricing is ideal for agencies with a strong track record of high ROI. Instead of charging by hours or deliverables, you charge based on the value you provide, incentivizing your agency to drive results.
With Klaviyo, this often involves revenue sharing: the more revenue you generate for the client, the more you earn. This model shows confidence in your ability to deliver.
When presenting this pricing to clients, offer options, such as a flat rate versus a lower flat rate with revenue share. This gives clients a sense of control and flexibility.
Downside: We recommend this for clients that you are confident that you can drive results for. Additionally, clients may want to renegotiate if they end up paying more due to strong results. Have a contingency plan, like waiving the monthly fee if the revenue share exceeds a certain amount.
Hybrid Pricing
Hybrid pricing combines elements of different models to create a more tailored approach. For instance, you might charge a base retainer fee for ongoing management and a project-based fee for specific tasks.
This approach allows you to maximize revenue potential while addressing varied client needs. By blending models, you can create a pricing structure that scales with your clients' growth and maintains a steady income stream for your agency.
Downside: Managing multiple pricing structures can be complex, requiring detailed tracking and reporting to ensure clarity and fairness for both parties.
Tiered Pricing
Tiered pricing offers different levels of service at varying price points, each providing distinct features or services. This model caters to a wide range of clients, from small businesses to large enterprises, allowing them to choose the level that fits their needs and budget.
Pro Tip: Clearly define what each tier includes and provide enough value to justify the price difference. Use tiered pricing to upsell clients to higher tiers as their needs grow.
Create a value ladder where each tier builds on the previous one. For example, a basic tier might include essential email campaigns and reporting, while higher tiers offer advanced segmentation, automation, and personalized support.
Downside: Clients in lower tiers may feel underserved if their needs grow, potentially leading to dissatisfaction if they do not upgrade. Ensure a clear upgrade path and communicate the benefits of higher tiers to encourage clients to move up as their business needs evolve.
Klaviyo recommends using a platform-based selling model. Instead of just selling Klaviyo as individual features like email or SMS, it's better to show how the entire Klaviyo platform can help merchants achieve their goals. If you're selling Klaviyo as a platform, it's best to use retainer, tiered, or value-based pricing.
You might be wondering how to switch from an hourly model to a retainer or value-based model. In the next lesson, we'll provide a framework for transitioning your services from hourly or project-based to retainer or tiered pricing.